Dr Pepper Snapple Looks Towards Strong Returns on Capital

Source: FLEXNEWS13/09/2010

September 13 2010 – Dr Pepper Snapple is looking towards a period of strong returns and healthy operating margin expansion for 2015 and beyond.

Speaking at an investor’s conference, Larry Young, president and CEO at Dr Pepper Snapple Group, gave an overview of the company’s recent performance. He said since 2008 the company has been focused on building a strong business foundation.

He said: “This focus is particularly relevant given the continued weak economic backdrop. With this foundation phase almost complete, we can now turn our full attention to building our distribution and our availability. During this phase, I would expect to see top line growth at a faster rate, allowing us to reinvest back into the business. At the same time, we will continue to build our capabilities to win in the marketplace.”

Earlier this year FLEXNEWS reported that Dr Pepper Snapple expects that its new Victorville, California, plant will enable additional penetration in the west of the US for its juice drinks.

Mr Young added: “For 2015 and beyond, our scale and imbedded continuous improvement mindset should foster a period of strong returns on capital and very healthy operating margin expansion. After many years of underinvestment by our former parent, it was critical that we strengthen our infrastructure, technology, people and processes. In the last three years, we've built an efficient hub and spoke supply chain model culminating in the opening of our fifth regional centre in Victorville earlier this year. We've created our packaged beverages segment through the integration of our company owned DSD business, which spans 34 states. And our warehouse direct business, which manufactures and sells Hawaiian Punch, Clamato, Mott's apple sauce and juice, premium CSDs and mixers. We've completed the roll out of handhelds and our SAP upgrade for DSD. SAP Phase 2 covers our warehouse direct and Mexico businesses and is well underway. I'm happy to say, with detailed planning and a staged roll out, we've deployed new systems with absolutely no business interruption.”

Mr Young went on to say that the company has added USD 80 million to its marketing budget in order to grow its brands. He said: “With the average adult consuming 3,900 eight ounce servings of liquid per year, our goal of capturing 100 incremental servings represents a modest 2.5 point shift in consumer drinking habits. With a shift of flavours, a bias towards functionality, and continued brand investments, we're bullish about our long term growth prospect in North America.”

During the conference, the company’s chief financial officer Marty Ellen told the conference: “Over the long term, we believe that execution of our strategies will yield 3% to 5% net sales growth and high single digit EPS growth. We will continue to balance volume, price, and mix to ensure we're always providing value to our consumers. Our focus on execution and innovation has and will drive distribution gains, increase our share of immediate consumption occasions, and bring new users to the franchise. Long term earnings per share growth will come from top line growth, continuous improvement opportunities at every level, and below the line leverage including repurchases of our common stock. Against a consumer environment that truthfully is weaker than we thought it would be at the start of the year, our business has delivered solid results.”